UNITED RIGGERS & ERECTORS v. COAST IRON & STEEL

Respondent’s Petition for Review

Cal.January 20, 2016

6231549 © Case No.: IN THE SUPREME COURT OF THE STATE OF CALIFORNIA UNITED RIGGERS & ERECTORS,INC., SUPREME COURT Plaintiff and Respondent, F | L. E D VS. JAN 20 2016 COAST IRON & STEEL CO., Defendant and Appellant. Frank A, McGuire Clerk —Deputy After a Decision By the Court of Appeal, Second Appellate District, Division One Case No. B258860 PETITION FOR.REVIEW R. Duane Westrup, SBN 58610 WESTRUP & ASSOCIATES 444 Ocean Boulevard, Suite 1614 Long Beach, California 90802-4524 Telephone No.: (562) 432-2551 Facsimile No.: (562) 435-4856 E-Mail: jveloff@westrupassociates.com Attorney for Plaintiff, Respondent, and Petitioner COAST IRON & STEEL CO. TABLE OF CONTENTS Page(s) TABLE OF AUTHORITIES ............. 0... 0. eee eee eee ili QUESTIONS PRESENTED FOR REVIEW .........0....0-.0 0000005 l WHY REVIEW SHOULD BE GRANTED ........................ 2 SUMMARYOF THE CASE ........... 0.0000 cece eee eee 5 DISCUSSION OF THE LEGAL PRINCIPLES ..................... 9 THE TRIAL COURT WAS CORRECT IN HOLDING THAT COAST DID NOT VIOLATE THE PROMPT PAYMENT STATUTES ........ 9 A. The Prompt PaymentStatutes .. 2.2.0. 9 B. The Prompt Payment Statutes Are Analogous to One Another ... 11 C. Martin Brothers v. Thompson Pacific Const., Inc. Sets Forth The Correct Interpretation of the Prompt Payment Statutes ......... 12 D. East West Bank’s Narrow Definition of “Dispute” Is Incorrect ... 15 E. Coast Provided Compelling Evidence of the Disputes in United Riggers’ Claims 2.1... eee 17 THE TRIAL COURT WAS CORRECTIN ITS AWARD OF REASONABLE ATTORNEYSFEES TO COAST ................. 18 COAST WAS THE PREVAILING PARTY .................00005. 20 CONCLUSION ........ 0000 cecetener e tenes 22 CERTIFICATE OF WORD COUNT .....cccccccceccecceeceeeees 23 il TABLE OF AUTHORITIES Page(s) STATE CASES Alpha Mech., Heat. & Air Cond., Inc. v. Travelers Cas. & Surety Co. of America (2005) 133 Cal-App.4th 1319 22...eee eee eee 12,16 Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711 10...eee 17 Citizens for Better Streets v. Board of Supervisors of San Francisco (2004) 117 CalApp-4th 1...eeeeee eee 17 East West Bank v. Rio School District (2015) 235 Cal.App.4th 742 22...eee passim Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568 ... 2.2... eee eee. 20,21 Hinerfeld-Ward, Inc. v. Lipian (2010) 188 Cal-App.4th 86.0... 0.0... ee eee eee, 19 Martin Brothers v. Thompson Pacific Const., Inc. (2009) 179 Cal.App.4th 1401 2.2.00... eee eee. passim Pasadena Police Officers Assn. v.City of Pasadena (1990) 51 Cal.3d 564 2...eeeeee 16 People v. Connor (2004) 115 Cal.App.4th 669 .. 0.0...eee 14 People v. Gardeley (1996) 14 Cal.4th 605 2.0...eeeee 14,16 Taylor v. Van-Catlin Construction (2005) 130 Cal.App.4th 1061.20.00... eee ee eee 12,20 Tesco Controls, Inc. v. Monterey Mechanical Co. (2004) 124 Cal.App.4th 780 .. 2...eee eee 9,11 ill Winick Corp. v. Safeco Insurance Co. (1986) 187 Cal.App.3d 1502 2.2.0.0... 0... 20,21 STATUTES & RULES Business and Professions Code section 7108.5 .............52004 passim California Civil Code section 3250 oo eee e eect eee eeeeeeeeeeees 21 California Civil Code section 8800 2... 6...eens 2 California Civil Code section 8812 .. 2.0.6.2eceee ee 16 California Civil Code section 8814 .. 2.0... 0... ccc eee passim California Civil Code section 8818 2.0.6... eeeee passim Public Contract Code section 7107 2.2...ceeee passim iv TO THE HONORABLE CHIEF JUSTICE AND HONORABLE ASSOCIATE JUSTICES OF THE SUPREME COURT OF CALIFORNIA: Petitioner Coast Iron & Steel Co. (“Coast”) seeks review of the published opinion by the Court of Appeal, Second Appellate District, Division One, filed November 23, 2015, and modified on December 3, 2015 (Exhibit “A”). Order for publication on December 18, 2015. No rehearing was requested. QUESTION PRESENTED FOR REVIEW This case presents the following questions for review: Issue One - the meaning of Civil Code §§ 8814 and 8818. The Court of Appeal below identified the issue as follows: “at issue is whether a contractor may withhold the retention when there is a good faith dispute of any kind between the contractor and a subcontractor, or only whenthe dispute relates to the retentionitself.” Issue Two - determination of attorneys fees. Wherea plaintiff sues for retention under Civil Code §8814 and late payments under Business and Professions Code §7108.5 and prevails on the retention issues but the defendant prevails on the late paymentissues, how are attorneys fees determined? WHY REVIEW SHOULD BE GRANTED California intermediate courts are in conflict with regardto the progress payment and retention payment statutes of the State. Contractors and governmentalauthorities need guidance asto how to conduct themselvesin the thousands of construction disputes that occur every year in California. There is a statutory scheme in California with regard to payment of retention and progress payments both with regard to public works and private construction projects. (Public Contract Code §7107, Business andProfessions Code §7108.5, and Civil Code §8800 seq.). These statutes are functional equivalents. There are no published decisions discussing Business and Professions Code §7108.5 or Civil Code §8800 et_seg. There are two published opinions that address Public Contract Code §7107. The Trial Court in this case relied upon Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc. (2009) 179 Cal.App.4th 1401 (“Martin Brothers”) for guidance. During the pendency of the appeal, a panel in the Second District issued its opinion in the East West Bank v. Rio School District (2015) 235 Cal.App.4th 742 (“East West Bank’) case which was completely contrary to the Martin Brothers opinion. The panelin this case followed the East West Bankopinion,but ignored Business andProfessions Code §7108.5 andthe fact that under any circumstance, Defendant prevailed underthatstatute. This Court’s guidancein this case will provide the entire construction industry in California with insight into the statutory payment and retention rules for both public and private projects. The appellant subcontractor in Martin Brothers argued that section 7107(e) "cannot be applied to allow withholding of undisputed retentions." Martin Brothers, supra, at 1411. The court there rejected the argument that section 7107(e) only allowed withholding where there is a dispute over retention, as opposed to a dispute over other matters such as claims for extra work. Justice Cantil-Sakauye explained: Thestatute contains no languagerestricting the word "dispute" to any particular kind of dispute other than it must be "bona fide." The ordinary meaning of "dispute" is a "verbal controversy," a "debate," or "quarrel." (Merriam-Webster's Collegiate Dict. (11th ed.2006) p. 362, col. 1.) A controversy, debate or quarrel, i.e., a dispute, does not change its character depending onits subject. The subject is immaterialto its nature as a dispute. Indeed, in the context of construction litigation, a dispute may arise between a general contractor and a subcontractor concerning any numberofsubjects,including,but not limited to, nonperformance, improper or substandard performance, the timing of performance, or additional performance of work. Martin Brothers, supra, at 1412. In its opinion, the Court in theinstant case stated: The Martin Brothers court affirmed the trial court's judgment denying the subcontractor relief. (Martin Brothers, supra, 179 Cal.App.4th at pp. 1417-1418.) The court rejected the subcontractor's argument that, because the statute was -3- intended to protect subcontractors, contractors were entitled to withhold retention payments only ifthere was a dispute overthe amountof retention owed. (/d. at p. 1411.) It concluded that the statute was not ambiguous: "The statute contains no languagerestricting the word'dispute' to any particular kind of dispute other than it must be 'bonafide." (Ud. at p. 1412.) In reaching that conclusion,the court in Martin Brothers failed to pay sufficient heed to our Supreme Court's instruction that, when interpreting the plain meaning ofa statute, "[W]e do not examine[its] languagein isolation, but in the context of the statutory framework as a wholein order to determineits scope and purpose and to harmonize the various parts of the enactment." (Coalition ofConcerned Communities, Inc. v. City of Los Angeles. (2004) 34 Cal.4th 733, 737.) As the Martin Brothers court acknowledged, the remedial purpose of the prompt paymentstatutes is "'to encourage general contractors to pay timely their subcontractors and to provide the subcontractor with a remedy in the event that the contractor violates the statute." (Martin Brothers, supra, 179 Cal.App.4th at p. 1410, quoting Morton Engineering & Construction, Inc. v. Patscheck (2001) 87 Cal.App.4th 712, 720.) Yet its interpretation of "dispute" promoted the opposite result.” The court then adopted the East West Bank analysis but assumed there was no Business and Professions Code §7108.5 issue. Second, if this Court adopts the analysis of the East West Bank Court, which it should not, an additional issue is raised. In this case, plaintiffpled a cause of action for recovery of retention (Civil Code §8814) and also for delayed payment (Business and Professions Code §7108.5). The Trial Court ruled that Coast prevailed on both issues. The Court of Appeals below held that Coast prevailed on the delayed payment issue but that United Riggers prevailed ontheretention issues. IfUnited Riggers prevailed on the retention issue, and Coast prevailed on the delayed paymentissue, how should thetrial court, on remand, determine the attorney fee award? SUMMARYOF THE CASE Coast is a licensed contractor and steel fabricator. United Riggersis a licensed contractor and erector. Both Coast and United Riggers submitted competing bids for a project at Universal Studios known as Project Dervish. Universal, the ownerofthe project, accepted Coast's bid, and on October18, 2010, entered into a contract (the "Construction Contract") with Coast to provide Miscellaneous Metals Work for the project. (Volume | of Clerk's Transcript "CT" pages 26-128). Coast then hired United Riggers as a subcontractor on or about May 31, 2011 for the project by way of a purchase order. (1 CT 129). The parties entered into the lump sum purchase order in which Coast agreed to pay United Riggers $722,742.00 for its work. Under the purchase order between Coast and United Riggers, United Riggers agreed to "furnish all labor, supervision, equipment, supplies,tools, scaffolding, hoisting, layout, unloading and handling, incidentals, permits, licenses, taxes and everything else required to perform and complete the work. required to install all Miscellaneous Steel per the Subcontract Agreement between Coast Iron & Steel Co. and Universal City Studios LLLP dated 10-18-10 (USH-10-6313-AMJ), which is attached and madea part of this agreement. All work is to be performed in accordance with the General Contract and the Contract Documents referred to in the General Contract. . . All work is to be performed per the project schedule which is subject to change.” (1 CT 129) (emphasis added). The purchaseorderalso states that United Riggers "agrees to be bound to Coast Iron & Steel Co. as CoastIron & Steel Co.is bound to the Contractor and as the Contractor is bound to the Owner.” (1 CT 129). There were severalissuesthat affected the project at Universal Studios; Both parties were well aware ofthese potential exigencies which weredetailed in the Construction Contract. (1 CT 37: 1.4) First, the project could be shut down on a moment's notice due to filming, as Universal Studios is a functioning film studio. (Volume 4 of Reporter's Transcript "RT" page 1527, © lines 23-26). Parking and storageat thejob site was extremely limited since the project was located in a functional film studio and amusement park. Each contractor was limited to one parking pass. (4 RT 1526:26-1527:20). The original lump sum purchase order called for Coast to pay United Riggers $722,742.00. However, througha series ofchange orders, Coast paid an additional $773,237.50 to United Riggers. (3 CT 922:1-4). See also, Trial Court's Statement of Decision page 2, lines 18-21, Exhibit 1 to Appellant's: “ A I R T E L I d , O D M e e e Motion to Augment the Record "MA"). This additional amount more than doubled the purchase orderprice to a total of $1,495,979.50 that was paid to United Riggers. The additional amount waspaid througha series of change orders authorized by the Construction Contract. (Paragraph 12.2 of the Construction Contract, which is incorporated into the purchase order, covers "Claims for Increases in the Contract Sum" 2 CT 125.) That provision specifically requires that written notice of claims for extra compensation be given no "later than three (3) days after the occurrence ofthe eventgivingrise to the claim..." (Id.) Throughout the duration of the project, United Riggers utilized the process ofsubmitting change order requests whenthe scope ofwork changed. United Riggers was compensated accordingly when those change orders were approved by Universal, whichrepresented the additional $773, 237.50 paid to United Riggers. Shortly after work was completed at Project Dervish, on or about March 27, 2012, United Riggers sent Coast a "claim" for payment for extra work. United Riggers demanded that Coast pay an additional $352,542.40 by claiming that Coast lost parts, failed to communicate properly, made fabrication errors, caused delays, and failed to pay outstanding changeorders. (Exhibit 3 to AOB). Coast disputed these claims. United Riggers filed its complaint on January 24, 2013. United Riggers sued Coast (in part) under Civil Code §§ 8814, 8818 (wrongful withholding of retention) and Business and Professions Code §7108.5 (delayed progress payments). See Complaint Third CauseofAction, (1 CT 19). After a nine day benchtrial between May 12 and 22, 2014,the Trial Court found that United Riggers’ claims for moneyasset forth in its complaint were not submitted for approval via the change order process required by Paragraph 12.2 ofthe Construction Contract. (Exh. 1 toMA 2:22-27), Notably, United Riggers' own expert witnesstestified that any extra work by United Riggers was the "direct result of disruption caused by [Universal]'s scope changes" (4 RT 1232:21-25). The Trial Court entered its Statement ofDecision on July 15, 2015 (Exh. 1 to MA). Coast then movedforits attorney fees on July 29, 2015 (2 CT 272-287), to which United Riggersfiled an opposition on August 14, 2015 (2 CT 288-307), and Coastfiled a reply on August 21, 2014 (2 CT 325-330). United Riggers filed a motionto strike or tax costs on August 15, 2014 (2 CT 312-324), to which Coastfiled an opposition on August 28, 2014 (2 CT 338-351). After carefully considering written briefs and oral | arguments, the Trial Court awarded Coast $150,000 in attorney fees. United Riggers filed its notice of appeal on September 11, 2014. DISCUSSION OF LEGAL PRINCIPALS THE TRIAL COURT WAS CORRECTIN HOLDING THAT COAST DID NOT VIOLATE THE PROMPT PAYMENTSTATUTES. A. The Prompt Payment Statutes "California has a series of so-called ‘prompt payment’ statutes that require general contractors to pay their subcontractors within specified, short timeperiods, and that impose monetary penalties for violations. Business and Professions Code section 7108.5 and Public Contract Code section 7107 are two of those statutes." Martin Brothers. Const., Inc. v. Thompson Pacific Const., Inc. (2009) 179 Cal.App.4th 1401, 1409 (quoting Tesco Controls, Inc. y. Monterey Mechanical Co. (2004) 124 Cal.App.4th 780, 800). 1. California Civil Code section 8814: (a) If a direct contractor has withheld a retention from one or more subcontractors, the direct contractor shall, within 10 days after receiving all or part of a retention payment, pay to each subcontractor from whom retention has been withheld that subcontractor's share of the payment. (b) If a retention received by the direct contractor is specifically designatedfora particular subcontractor, the direct contractor shall pay the retention paymentto the designated subcontractor, ifconsistent with the terms of the subcontract. (c) If a goodfaith dispute exists between the direct contractor and a subcontractor, the direct contractor may withhold from theretention to the subcontractor an amount not in excess of 150 percent of the estimated value of the disputed amount. Civil Code §8814 (emphasis added). 2. California Business and Professions Code section 7108.5 California Business and Professions Code section 7108.5 states in relevantpart: (a) A prime contractor or subcontractorshall pay to any subcontractor, not later than seven daysafter receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent ofeach subcontractor's interest therein. In the event that there is a goodfaith dispute over all or any portion of the amount due on a progress payment from the prime contractor or subcontractor to a subcontractor, the prime contractor or subcontractor may withhold no more than 150 percent of the disputed amount. (b) Any violation ofthis section shall constitute a cause for disciplinary action and shall subject the licensee to a penalty, payable to the subcontractor, of 2 percent of the amount due per month for every month that paymentis not made. (c) In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney's fees and costs. Bus. & Prof. Code §7108.5 (emphasis added). United’s third cause of action was based onthisstatute. 3. California Public Contract Code section 7107 California Public Contract Code section 7107 states in relevant part: (c) Within 60 days after the date of completion of the work of improvement, the retention withheld by the public entity shall be released. In the event of a dispute between the public entity and the original contractor, the public entity may withhold from the final payment an amount not to exceed 150 percent of the disputed amount.Forpurposesofthis subdivision, "completion" means any ofthe following: [22] -10- (e) The original contractor may withhold from a subcontractor its portion ofthe retention proceeds ifa bonafide dispute exists between the subcontractor and the original contractor. The amount withheld from the retention payment shall not exceed 150 percent of the estimated value of the disputed amount. (f) In the event that retention payments are not made within the time periods required bythis section, the public entity or original contractor withholding the unpaid amounts shall be subject to a charge of 2 percent per month on the improperly withheld amount, in lieu of any interest otherwise due. Additionally, in any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to attorney's fees andcosts. Pub. Contract Code, §7107 (emphasis added). B. The Prompt Payment Statutes Are Analogous to One Another Business and Professions Code section 7108.5 and Public Contract Code section 7107 are functional equivalents of each other. More support for this interpretation can be found in Tesco Controls, Inc, supra, whichstated that "[i]n the eventthere is a bonafide dispute over the amount owed,both statutes authorize the general contractor to withhold up to 150 percent ofthe disputed amount. (Bus. & Prof.Code, §7108.5; Pub. Contract Code, §7107, subd.(e).) Both statutes award attorneys fees and coststo the prevailing party in an action to collect amounts wrongfully withheld. (Bus. & Prof'Code, §7108.5; Pub. Contract Code, §7107, subd. (f)." Tesco Controls, Inc. at 767. The prompt paymentstatutes’ share the same intent. In essence, the statutes contain nearly identical provisions that permit the withholding of -l1- retention payments in the event of a bona fide good faith dispute. Coast is unaware of, and United Riggers did not cite to, any authority that states the intent or interpretation of Public Contract Code section 7107(e)is different than that ofBus. & Prof. Code section 7108.5, or Civil Code sections 8814 and 8818. In interpreting analogous statutes, courts have interpreted "bona fide dispute" to mean "good faith dispute." See, e.g., Taylor v. Van-Catlin Construction (2005) 130 Cal.App.4th 1061, 1069 with respect to Civil Code section 3260(e). See also, Alpha Mechanical, Heating&Air Conditioning, Inc. v. Travelers Casualty & Surety Co. ofAmerica (2005) 133 Cal.App.4th 1319, 1339 (stating that "good faith dispute" to mean "'that state of mind denoting honesty ofpurpose, freedom from intention to defraud, and generally speaking, meansbeing faithful to one's dutyor obligation’ " with respect to Bus. & Prof. Codesection 7108.5.) C. Martin Brothers v. Thompson Pacific Const., Inc. Sets Forth The Correct Interpretation of the Prompt PaymentStatutes. The concept of East West Bank case's limitation of the term "dispute" in section 7107(c) was expressly considered and rejected in Martin Bros. Const., Inc. v. Thompson Pacific Const., Inc. (2009) 179 Cal.App.4th 1401. The California Supreme Court deniedpetition for review ofMartin Brothers on March 24, 2010.In that case, the subcontractor, Martin Brothers, submitted change order requests for compensation for extra work that it alleged the -12- contractor, Thompson Pacific directed or that were otherwise required. /d. at 1406. The dispute was about additional compensation that the subcontractor contended was owed over and above the agreed contract price for work that wasallegedly outside the scope of the contract. The appellate court ruled that a general contractor could withhold retention without violating the prompt-payment statutes if there exists a good faith dispute between the parties. /d. at 1414. The appellant subcontractor in Martin Brothers argued that section 7107(e) "cannot be applied to allow withholding of undisputed retentions." Martin Brothers at 1411. The court there rejected the argumentthat section 7107(e) only allowed withholding where there is a dispute over retention, as opposed to a dispute over other matters such as claims for extra work. Justice Cantil-Sakauye explained: The statute contains no languagerestricting the word "dispute" to any particular kind of dispute other than it must be "bona fide." The ordinary meaning of "dispute" is a "verbal controversy,” a "debate," or "quarrel." (Merriam-Webster's Collegiate Dict. (11th ed.2006) p. 362, col. 1.) A controversy, debate or quarrel, i.e., a dispute, does not change its character depending on its subject. The subject is immaterialto its nature as a dispute. Indeed, in the context of constructionlitigation, a dispute may arise between a general contractor and a subcontractor concerning any numberofsubjects,including,but not limited to, nonperformance, improper or substandard performance, the timing of performance, or additional performance of work. Martin Brothers at 1412. -13- The opinion in Martin Brothers confirmed the Legislature’s intent was to makethe test for liability under section 7107(c) whetherthere is a bonafide dispute between the parties, not whether there is a correct type of bona fide dispute. The Martin Brothers court stated " '[w]hen statutory languageis clear and unambiguousthere is no need for construction, and we will not indulge in it. We will not speculate that the Legislature meant something other than what it said. Nor will we rewrite a statute to posit an unexpressedintent.'" Martin Brothers at 1411 (internal citations omitted). See also, People v. Gardeley (1996) 14 Cal.4th 605, 621 (the words of the statute "generally provide the most reliable indicator of‘legislative intent’ and when languageofa statuteis clear and unambiguous,there is no need for construction"); People v. Connor (2004) 115 Cal.App.4th 669, 678 (courts should give wordsin statute their usual and ordinary meaning, and the plain meaning governsif there is no ambiguity.) A "bonafide dispute" means a "bonafide dispute," not a particular type of bona fide dispute. The term "dispute" is not ambiguous and not as limited as United Riggers would lead the Court to believe. "When we'scrutinize the actual words of the statute, giving them a plain and commonsense meaning’, we conclude the exception of section 7107(e) applies to any good faith dispute between a general contractor and -14- subcontractor." Martin Brothers at 1414 (citation omitted; emphasis added). Any goodfaith dispute qualifies, not just certain types of disputes such as mechanics’ liens. Accordingly, the Trial Court did not err in applying the analogous Business & Professions Code section 7108.5 whenit held that there was a "good faith dispute" between the parties and that Coast did not violate the prompt payment statutes. The trial court correctly followed Martin Brothers. D. East West Bank’s Narrow Definition of Dispute" Is Incorrect The decision in East West Bank v. Rio School District (2015) 235 Cal.App.4th 742 cited by United Riggers ignores both established California law andtherealities of the construction industry. The court in East West Bank erroneously held that "a dispute over the contract price does not entitle a public entity to withhold funds due a contractor." (East West Bank at 745). The court there held that "dispute" as stated in section 7107is limited to only mean "mechanic liens and deficiencies in the contractor's performance." (/d at 749). This narrow reading of "dispute" finds no basisin the legislative history ofthe statute and departs from the plain meaning ofthe statute. Ifthe Legislature had wantedto limit disputes covered underthe prompt paymentstatutesto only those two types ofdisputes, it would have doneso, but did not. The court in East West Bank notedthat the qualifier -15- "good faith" was added in Civil Code section 8812, subdivision (c), the analogous prompt paymentstatute for private worksprojects. (Id at 749). The recodification of Civil Code section 3260(c) into Civil Code section 8812 became operative in July, 2012 - three years after Martin Bros. Const., Inc. v. Thompson Pacific Const., Inc. (2009) 179 Cal.App.4th 1401 was decided. However, the Legislature did not amend section 7107 to add the term "good faith." Clearly, the Legislature reviewed the statutes and had every opportunity after the Martin Brothers decision to expressly limit the type of dispute to mechanic liens or contractor's performance, but declined to do so. The Legislature likewise could have added other limiting language to the term "dispute" but did not. It is evidently clear that the Legislature adopted the Martin Brothers’ interpretation of the term "disputes" and decided not to disturb that ruling by revising the prompt payment statutes. "When the legislature has employed a term or phrase in one place and excludedit from another, it should not be implied where excluded." Pasadena Police Officers Assn. v. City ofPasadena (1990) 51 Cal.3d 564, 576. More importantly, however, is the court's reasoning for declining to imply missing terms from the benchlike the court in East West Bank: "[WJe will not imply terms where the legislature has excluded them in both statutes.” Alpha Mechanicalat 1340 citing to People v. Gardeley (1996) 14 Cal.4th 605, -16- 622 ["Whenthe Legislature has used a term or phrasein onepart of a statute but excludedit from another, courts do not imply the missing term or phrase in the part ofthat statute from which the Legislature has excludedit"]; Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 725; Citizens for Better Streets v. Board ofSupervisors ofSan Francisco (2004) 117 Cal.App.4th 1, 6 [court will not presumeintention to legislate by implication]. The Court below adopted the East West Bank analysis and appliedit to private worksprojects. In doing so, it declined to adopt the more soundanalysis in Martin Brothers. E. Coast Provided Compelling Evidence of the Disputes in United Riggers' Claims Unlike the court in East West Bank, the court in Martin Brothers correctly understoodthe realities ofconstruction litigation in that disputes may not be so easy to characterize: {T]he precise nature of the dispute may be difficult to characterize. For example, what may be additional performance in the eyes of a subcontractor may be performanceof the terms of the contract or correction of inadequate performance in the eyes of the general contractor. There may be questions over doublebilling, excessive billing, or allocation of billing. Thus, the nature or subject of a dispute in construction litigation is open to many possibilities. Martin Brothers at 1412. _ The disputes between United Riggers and Coast are precise types of disputes that the Martin Brothers court contemplatedin reaching its decision. United Riggers considered its work "additional performance" while Coast -17- ey sa I R E N successfully proved at trial that United Riggers’ work was simply "the performance of the terms of the contract." There were also questions over double billing and excessive billing. Coast's witness Scott Sullivantestified at length about the dozens of change orders that United Riggers belatedly submitted. Mr. Sullivan testified to the satisfaction of the Trial Court that the change orders were for work already done or change ordersalready paid. THE TRIAL COURT WAS CORRECT IN ITS AWARD OF REASONABLE ATTORNEYSFEES TO COAST The Legislature added the 2% per month penalty provisions to the prompt payment statutes to give contractors an effective weapon against anyone who wrongfully withheld retention funds on a constructionproject. However, the Legislature also addedthat theprevailingparty shall be entitled to reasonable attorney's fees and costs in any action for the collection of wrongfully withheld funds. The language andthe purposeofthe attorneys’ fee provisionis clear: A contractor or sub-contractor who misuses the powerful 2% per month penalty as a threat against an innocent defendant may beliable | for attorney fees. This reciprocal attorney-fee provision is a disincentive against the coercive misuse of the prompt paymentstatutes. In this case, | United Riggers asserted violations of Civil Code sections 8814, 8818 and Business andProfessions Code section 7108.5 against Coast based on Coast's alleged wrongful withholding of the retention funds and late progress -18- payments. The Trial Court was correct in ruling that United Riggers did not prevail on its prompt payment claims. Because there was a goodfaith dispute betweenthe parties that entitled Coast to withhold the retention. (Statement of Decision 5:1-2). United Riggers also did not prevail on its wrongful retention claims. In Martin Brothers, the appellate court affirmed the trial court's conclusionthat the defendant had notviolated the applicable prompt payment statutes and wasthusentitled to an award of $150,000in attorney fees. Martin Brothers at 1405. The Court ofAppeal there noted that although section 7107 is a remedial statute designed to encourage timely payment of retention, section 7107 also contains the mandatory reciprocal attorney-fee provisions that "reflects the Legislature's balancing of the competing interests" of the parties to the construction contract. Martin Brothers at 1414. See also, Hinerfeld-Ward, Inc. v. Lipian (2010) 188 Cal-App.4th 86, 102 (holding that the legislative history of Civil Code 8814 and 8818 (formerly section 3260.1) demonstrates a legislative intent that both the monthly two percent charge and reasonable attorney fees are available to a party prevailing on an action under that statute.) Theintent ofthe Legislature ts clear: any contractorthattries to misuse the penalty provisions as a means to coerce paymentofretention fundswill be -19- subject to paying an innocent defendant's attorneyfees. "Ifthe Legislature had intended only the successful demandingparty to receiveattorneyfees, it would haveso stated instead of permitting an award to the "prevailing party." There is simply no logical reason to punish the party who was notat fault-who justifiably retained paymentin good faith-by denying that party attorney fees for successfully defending against the other party's action for payment." Taylor v. Van-Catlin Const. (2005) 130 Cal.App.4th 1061, 1069. (emphasis in original). Here, the Trial Court correctly concluded that Coast is the prevailing party because it did not violate the prompt paymentstatutes, and properly awardedit attorney fees. COAST WAS THE PREVAILING PARTY Generally, a trial court's determination of a "prevailing party," within the meaning of an attorney-fee award statute, "should be affirmed on appeal absent an abuse ofdiscretion." Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574. Whena prevailing-party attorney fee statute does not define the term "prevailing party," the courts apply a pragmatic test to determine if one party in fact prevailed. See, Winick Corp. v. Safeco Insurance Co. (1986) 187 Cal.App.3d 1502, 1508. ("undertaking a ‘pragmatic inquiry’ into whetherthe -20- defendant prevailed," within the meaning of an attorney-fee statute, and finding that obtaining a technical dismissal with prejudice in fact amounted to "prevailing"); Heather Farms Homeowners Ass'n, supra, at 1574 (interpreting a prevailing party attorney fee statute and determining whichparty prevailed "on a practical level" using a pragmatictest.) In Winick, the plaintiff subcontractor brought a stop-notice action against the defendant surety company. The defendant successfully moved to dismiss the action becausethe plaintiffhad not served the summonswithin the statutory period. Winick at 1506. The Court of Appeal there considered the following language in Civil Code section 3250 which governs stop-notice actions against payment bondsureties: "In any action [on the payment bond], the court shall award the prevailing party a reasonable attorney's fee..." The court then applied the "pragmatic test" to determine the prevailing party and foundthat the surety defendant "had achieved one hundred percent" of what it sought to achieve as a defendant, because "the most...a_ civil defendant...ordinarily can hope to achieve is to have. the plaintiffs claims thrown out completely." Winick at 1508. Here, Coast unequivocally prevailed at trial. United Riggers failed to establish any liability on the part of Coast. Moreover, Coast's victory was not procedurallike the surety's in Winick. Instead, Coast successfully defeated all ofUnited Riggers' claims on the merits -2]- after a nine-day trial. The Trial Court was well within its discretion to determine that Coast was the prevailing party as to the prompt payment statutes and as to the entire litigation. Rather, for the Trial Court to hold otherwise would be an abuseofdiscretion. United Riggers' argument on appeal that it was the prevailing party because Coast paid the retention during trial has no merit. Ifthere was nothing left to litigate regarding the retention, United Riggers could have withdrawn the claim before trial. However, United Riggers continued to litigate the retention claim thus requiring Coast to vigorously defenditself. CONCLUSION California’s intermediate courts are in conflict with regard to the progress paymentandretention payment statutes. Private works contractors, public works contractors, and governmental authorities need this Court’s guidance as to how to conduct themselvesin the thousands of construction disputes that occur every year in California. Date: December 29, 2015 Respectfully submitted, By: ane Westrup Atto s for Defendant, Respondent, and Petitioner Coast Iron & Steel Co. -22- CERTIFICATE OF WORD COUNT (Cal. Rules of Court, Rule 8.504(d)(1)) I, R. Duane Westrup, an attorney at law duly admitted to practice beforeall the courts of the State of California and principal of the law firm of Westrup & Associates, attorneys of record herein for defendant, respondent, and petitioner Coast Iron & Steel Co., hereby certify that this Petition For Review document(including the memorandum ofpoints and authorities, headings, footnotes, and quotations, but excluding the tables of contents and authorities, and this certification) complies with the limitations of Rule of Court 8.504(d)(1)in that it is set in a proportionally-spaced 13- point typeface and contains 5,114 words as counted by the Corel Word Perfect version 10 word-processing program used to generate this document. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed December29, 2015 in Long Beach, California. -23- CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATEDISTRICT DIVISION ONE UNITED RIGGERS & ERECTORS,INC., B258860 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. VC062679) Vv. CERTIFICATION AND COASTIRON & STEEL CO.et al., ORDER FOR PUBLICATION Defendants and Respondents. COURT OF APPEAL - SECOND DIST IP Mt Ms 18 10) DEC 18 2015 JOSEPH A. LANE Clerk Baputy rere Theopinion in the above-entitled matter filed November 23, 2015, was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be published in the Official Reports andit is so ordered. (Lodleackas/ J. JOHNSON,J. Filed 12/3/15 United Riggers & Erectors v. Coast Iron & Steel Co. CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinionsnotcertified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not beencertified for publication or ordered published for purposesof rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATEDISTRICT DIVISION ONE UNITED RIGGERS & ERECTORS,INC., B258860 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. VC062679) Vv. ORDER MODIFYING OPINION COAST IRON & STEEL CO.et al., [Change in the Judgment] Defendants and Respondents. THE COURT: It is ordered that the opinion filed herein on November 23, 2015, be modified in the following manner: On page 11, the following sentence is addedto the end ofthe disposition: Eachparty to bear its own costs on appeal. This modification constitutes a change in the judgment. NOT TO BE PUBLISHED. ROTHSCHILD,P.J. JOHNSON,J. LULJ. Filed 11/23/15 United Riggers & Erectors v. Coast Iron & Steel Co. CA2/1 (unmodified version) NOT TO BE PUBLISHEDIN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts andparties from citingor relying on opinion snotcertified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has n ot been certified for publication or ordered published for purposes of rule 8.1115. IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATEDISTRICT DIVISION ONE UNITED RIGGERS & ERECTORS,INC., B258860 Plaintiff and Appellant, (Los Angeles County Super. Ct. No. VC062679) V. COAST IRON & STEEL CO.et al., Defendants and Respondents. APPEALfrom a judgmentof the Superior Court of Los Angeles County. Thomas I. McKnew,Jr., Judge. Reversed in part, affirmed in part. Law Office of Dirk Bruinsma and Dirk Bruinsmafor Plaintiff and Appellant. Westrup & Associates, R. Duane Westrup and Ian Chuang for Defendants and Respondents. This case arises out of a payment dispute between a contractor, Coast Iron & Steel Co. (Coast), and its subcontractor, United Riggers & Erectors, Inc. (United). After the work on a project wasfinished, United sent a demand to Coast to pay for change orders and for damages that United claimed Coast caused by mismanaging the project. Coast refused to pay, and also delayed forwarding United’s share of retention payments Coast had received from the ownerofthe project. After a benchtrial, the court found in favor of Coast. United appeals, contending that the trial court erred in finding that Coast was not liable for the extra payments, as well as for failing to assess penalties and attorney’s fees against Coastfor its delay in forwarding the retention payments. FACTS AND PROCEEDINGS BELOW In October 2010, Universal City Studios LLLP (Universal) contracted with Coast to provide “miscellaneous metals” work in the construction of a new ride at Universal Studios Hollywood based on the “Transformers” movie series. United in turn signed a purchaseorderthat served as a subcontracting agreement with Coast. The subcontractinitially called for United to be paid $722,742, but the general contract between Universal and Coast, which was referenced in the subcontracting agreement, created a process by which Coast could appeal to Universal for change orders to increase its compensation when unexpected expenses arose. United submitted change orders to Coast by meansof the same process, and Universal approved change orders that increased United’s compensation. Coast paid United for changeorders totaling an additional $773,237.60 over the contract price. On a monthly basis, Universal paid Coast 90 percent of the amount provided under the contract and the approved changeorders. Coast forwarded to United its share of the payments as it received them from Universal. In accordance with the terms of the contract, Universal retained the remaining 10 percent of all the payments as “retentions” pending final completion of the work. When work on the project was completed, Universal paid the 10 percent retentions to Coast. Coast owed United $149,602.52! as its share of the retention payments. In March, 2012, approximately two weeksafter the work had been completed, Coast sent an email to Unitedstating, “[p]lease have [a United employee] forward your final {change order] log along with any outstanding [change order requests] so we can review and coordinate to makesure everything has been submitted for you.” United responded bysending a letter demanding $274,158.40 as compensationfor“the mis[]managementand or delayed deliveries caused by Coast,” along with $78,384 in outstanding change order requests. Coast replied with an email reading,“I will see you in court!!” In January 2013, United filed suit against Coast, seeking $446,857.42 in damages, plus attorney’s fees, interest, and costs. The suit claimed that Coast owed $149,602.52 in retention payments and $23,186.50 for unpaid change orders, as well as $274,068.40 in damagesit attributed to missing parts, lack of communication by Coast, fabrication errors, delays in installation of steel, and lack of transportation access. In its third cause of action, United alleged that Coast had violated Civil Code section 8814(section 8814) and Civil Code section 8818 (section 8818), which require that contractors pay subcontractors their share of retention payments no more than 10 daysafter receipt by the contractor. The remaining causes of action alleged breach of contract, breach of the implied covenant of goodfaith and fair dealing, quantum meruit, and a claim on the contractor’s bond against defendant Arch Insurance Company. Three weeks after the case wasfiled, Coast paid approximately two-thirds of the withheld retention payment. Ten monthslater, Coast paid the remaining $42,887. Coast paid no interest along with its delayed payments. Nordid it pay any of the other damages United claimedin its lawsuit. After a bench trial in May 2014,the trial court ruled in favorof the defendants, finding that United had failed to prove that Coast was responsible for the extra expenses" United incurred, and that United had failed to follow the procedure specified in the contract when submitting its final change orders. The statement of decision, which Coast ! This figure was approximately 10 percentof the sum ofthe original contract price ($722,742) and the approved change orders ($773,237.60). 3 prepared andthetrial court adopted, stated that “there was a goodfaith dispute between Coast and United . . . that entitled Coast to withhold the paymentof retention.” Coast as the prevailing party moved for an award of attorney’s fees pursuantto section 8818. Thetrial court granted Coast’s motion in the amount of $150,000. The court also awarded Coast $5,289.05 in costs as the prevailing party. This appeal followed. DISCUSSION Onappeal, United argues that the trial court erred by ruling that Coast was entitled, because a good faith dispute existed between Coast and United, to withhold the retention payments. Likewise, United contends that, because it should have prevailed on the retention claim, the attorney’s fees awarded to Coast must be reversed. United also contendsthat the court erred by ruling againstit on its other claims. Weagree with United regarding its retention claim and attorney’s fees, and accordingly we reverse that part of the trial court’s judgment. Otherwise weaffirm. I. Retention Payments It is commonin the construction industry for the ownerof a project to pay contractors on a monthly basis for workas it is completed, but to retain a percentage of the amount owed as a guarantee of satisfactory performance. A series of “prompt payment”statutes govern the paymentof retentions and other similar payments to contractors and subcontractors. (These statutes include Civ. Code, § 8800 et seq., Bus. & Prof. Code, § 7108.5, and Pub. Contract Code, § 7107, among others.) United’s entitlement to prompt payment of the withheld retention turns on theinterpretation of those statutes. Most relevanthere is section 8814, which providesthat, “[i]f a direct contractor has withheld a retention from one or more subcontractors, the direct contractor shall, within 10 days after receiving all or part of a retention payment, pay to each subcontractor from whom retention has been withheld that subcontractor’s share of the payment.” (/d., subd. (a).) Thereis an exception to this requirement, however: “Ifa good faith dispute exists between the direct contractor and a subcontractor, the direct contractor may withhold from the retention to the subcontractor an amountnot in excess of 150 percent of the estimated value of the disputed amount.” (/d., subd.(c).) At issue here is whether a contractor may withhold the retention whenthere is a dispute of any kind between the contractor and a subcontractor, or only when the dispute relates to the retention itself. If the provision appliesto all disputes, then a contractor, acting in good faith, mayretain the retention pending the resolution of the dispute even if the dispute relates to other matters. If, on the other hand,the provision limits the withholding of the retention to only those disputes related to the retention itself, then despite any other disputes, the contractor must forward the retention within 10 days. Failure to do so subjects the contractor to a monthly penalty of 2 percent of the unpaid amountand attorney’s fees. (§ 8818.) Coast did not claim below orhere that a dispute relating to the retention existed. Rather, the dispute was about change orders and other claimed damages. Nonetheless, the trial court found that Coast wasjustified in withholding the retention becauseit had a “good faith dispute” with United. Atthe timethe trial court made its decision there was no case directly on point, nor is there one now. Butat the time of the decision there was case law interpreting Public Contract Code section 7107 (section 7107), which functionsidentically to section 8814 with respect to contracts with public entities. Just as section 8814, subdivision (c), allows a contractor to withhold retention payments from a subcontractor in case of a goodfaith dispute, section 7107, subdivision (¢) providesthat “[t]he original contractor may withhold from a subcontractorits portion of the retention proceedsif a bonafide dispute exists between the subcontractor and the original contractor. The amountwithheld from the retention paymentshal! not exceed 150 percent of the estimated value of the disputed amount.” Whenthetrial court decided this case, the prevailing authority on section 7107 was Martin Brothers Construction, Inc. v. rhompson Pacific Construction, Inc. (2009) 179 Cal.App.4th 1401 (Martin Brothers), whichheld that a contractorwith a goodfaith dispute with a subcontractor could withhold the retention even if the dispute was not about the retention. Since then a different court of appeal has taken the opposite view and held that withholding the retention is justified only if the dispute is about the retention itself. (East West Bank v. Rio School Dist. (2015) 235 Cal.App.4th 742 (East West Bank). We agree with East West Bank. In Martin Brothers,a public schooldistrict contracted with the defendant to build a high school, and the defendant subcontracted with the plaintiff to do clearing, grading, and paving work. (Martin Brothers, supra, 179 Cal.App.4th at p. 1406.) Throughout the course of construction, the subcontractor did extra work above what wascalled for in the contract. (/bid.) In some cases, change orders were approvedto authorize the extra work, but in other cases, the contractor disputed the subcontractor’s entitlement to extra payment. (Ibid.) The subcontractor eventually filed suit, seeking the withheld retention payments and compensation for unpaid extra work and changeorders. (Id. at p. 1408.) The contractor ultimately paid virtually the full amountthatthe subcontractor demanded, but the subcontractor continued the suit in order to seek penalties and attorney’s fees. (/d. at p. 1409.) The Martin Brothers court affirmedthetrial court’s judgment denying the subcontractor relief. (Martin Brothers, supra, 179 Cal.App.4th at pp. 1417-1418.) The court rejected the subcontractor’s argumentthat, because the statute was intended to protect subcontractors, contractors were entitled to withhold retention payments only if there was a dispute over the amountof retention owed. (/d. at p. 1411.) It concluded that the statute was not ambiguous: “The statute contains no languagerestricting the word ‘dispute’ to any particular kind of dispute other than it must be ‘bona fide.’” (Id. at p. 1412.) In reaching that conclusion, the court in Martin Brothers failed to pay sufficient heed to our Supreme Court’s instruction that, when interpreting the plain meaning of a statute, “[w]e do not examine[its] languagein isolation, but in the contextof the statutory framework as a whole in order to determine its scope and purposeand to harmonize the variousparts of the enactment.” (Coalition ofConcerned Communities, Ine. v. City ofLos Angeles (2004) 34 Cal.4th 733, 737.) As the Martin Brothers court 6 6ee acknowledged, the remedial purpose of the prompt paymentstatutes is “‘to encourage general contractors to pay timely their subcontractors and to provide the subcontractor with a remedy in the eventthat the contractor violates the statute.’” (Martin Brothers, supra, 179 Cal.App.4th at p. 1410, quoting Morton Engineering & Construction, Inc.v. Patscheck (2001) 87 Cal.App.4th 712, 720.) Yet its interpretation of “dispute” promoted the opposite result. The East West Bank court found the proper balance between the broader remedial purpose of the prompt paymentstatutes andthe right of contractors to insist on satisfactory performance from subcontractorsprior to final payment. Like Martin Brothers, supra, East West Bank concernedtheinterpretation of section 7107.7 In East West Bank, a schooldistrict contracted with a contractor to build a high school. (East West Bank, supra, 235 Cal.App.4th at p. 745.) The school district refused to pay for most of the contractor’s change orders, to release retention payments, or to pay other damages upon completion of the project. (/d. at p. 746.) The contractor sued, and after a bench trial, the trial court found in favor of the contractor, awarding damagesthat included statutory penalties pursuant to section 7107. (dd. at p. 747.) The East West Bank court affirmed the trial court’s judgment, holding that because there was no dispute regarding the retention payments themselves,the district was required to pay the contractor within the time specified by statute, regardless of whether there was a bonafide dispute regarding duties not related to the retention amount. (East West Bank, supra, 235 Cal.App.4th at pp. 748-749.) The court reasoned that “[w]hen [a remedial statute’s] meaning is doubtful, it will be construed to suppress the mischief at whichit is directed.” (/d. at p. 748.) According to the East West Bank court, “{sJection 7107’s purpose of ensuring the promptrelease of retention funds would not be served if any dispute justified retaining thefunds. There is no reason to allow a public entity to retain the funds once their purpose of providing security against ? Becausethis case involved a dispute between an owneranda direct contractor, the relevant provision was section 7107, subdivision (c), which requires public entities to pay retentions within 60 daysunless there is a dispute. 7 mechanics liens and deficiencies in the contractor’s performance has been served. Unless the dispute relates to one of those purposes, the public entity will not be protected from the statutory penalty.” (/d. at pp. 748-749.) The East West Bank court’s interpretation allows primary contractors to withhold retention payments to protect themselves from substandard or inadequate work by subcontractors. The additional 50 percent of the 150 percent withholding provision allows some margin for error, so that general contractors are protected even if it turns out that the estimated amountis inadequate to correct for substandard work. At the same time, subcontractors receive prompt payment of moneythat they are undisputedly owed. In this case, Coast did not deny that it owed United the full $149,602.52 retention that it withheld. The only dispute was over whether United wasalsoentitled to other payments it claimed. To excuse Coast in this case from paying United the retention payments would unduly increase the leverage of owners and primary contractors over smaller contractors and subcontractors by discouraging subcontractors from making legitimate claims for fear of delaying the retention payment. Wethus hold that, pursuant to section 8814, subdivision (c), a contractoris entitled to withhold a retention payment only whenthere is a good faith dispute regarding whether the subcontractoris entitled to the full amount of the retention payment. Accordingly, we reverse the judgmentofthe trial court as to this issue. On remand, the trial court is directed, pursuant to section 8818, to award United penalties and, as discussed below,attorney’s fees for the delayed retention paymentclaim. I. Attorney’s Fees Thetrial court granted Coast $150,000 in attorney’s fees as the prevailing party in the litigation. Section 8818 providesthat “[i]f an owner or direct contractor does not makea retention paymentwithin the time required bythis article .. . (b) [iJn an action for collection of the amount wrongfully withheld, the prevailing party is entitled to costs and reasonable attorney’s fees.”? Because we havereversedthe trial court’s judgment in favor of Coast underthis section, it is not the prevailing party with respect to the retention payments. Thetrial court’s judgmentrelating to attorney’s fees is therefore reversed. The court on remand shall determine and award attorney’s fees to United, including attorney’s fees for this appealas it relates to the retention claim. Il. Breach ofContract Claims In addition to its claim for unpaid retentions, United also sought $297,254.90 in damagesfor breach of contract, including for unpaid change orders and for additional costs that United claimed Coast caused it to incur. The trial court ruled in favor of Coast on these claims, finding that United had not followed the contractual procedure for seeking additional compensation, andthat, in any case, United had not provedits damages. United challenges the court’s decision, contending that the court erred in its ruling on the contractual requirements, and that this error tainted the court’s conclusion on damages. Wedisagree and affirm thetrial court as to these issues. | The contract between Universal and Coast created a method by which Coast could claim additional compensation beyond the amountthe original contract called for. Coast 3 In addition to awarding Coast attorney’s fees undersection 8818,thetrial court stated that Coast wasentitled to attorney’s fees pursuant to section 7107, subdivision (f), and Business and Professions Code section 7108.5 (section 7108.5), subdivision (c). Neither provision applies to this case. Section 7107 applies to the construction of public works, not private construction contracts like those at issue here. Section 7108.5 governs progress payments on ongoing work, not the repayment of retention payments. At oral argument, Coast contended that even if we were to reverse the trial court’s decision with respect to retention payments, Coast wouldstill be entitled to attorney’s fees becauseit prevailed with respect to United’s contract claims, and United cited section 7108.5 in its complaint in support of those contract claims. In fact, both Coast and United consistently and mistakenly believed throughoutthe courseofthis case that section 7108.5 governed retention payments. Aslate as its brief on appeal, Coast wrote that “[t]he attorney fee provisions of section 7108.5 [subdivision] (c) warn contractors and subcontractors not to assert meritless retention claims.” The subject that section 7108.5 covers, the timely payment ofprogress payments, was simply notpart of this case, and United’s contract claims cannot be understood as allegations of withheld progress payments. Coast may not recoverattorney’s fees under section 7108.5, subdivision (c) simply because United cited that section in its complaint. 9 wasrequired to “give Universal written notice of any claim [for increased payment] not Jater than three (3) days after the occurrence of the event givingrise to the claim, but (except in the event of emergencies) prior to the incurring of any expenses by [Coast]. [Coast] expressly waivesits right to an increase in the Contract Sum unless it complies. with the notice provisions of this paragraph.” Coast issued a purchase order to United that constituted the subcontract between the parties. That purchase orderstated that “[a]]l workis to be performed in accordance with the General Contract and the Contract Documents referred to in the General Contract... . [4] [United] agrees to be boundto Coast Iron & Steel Co. as Coast Iron & Steel Co. is bound to [Universal].” United contends that it was not bound to follow the terms of the general contract regarding additional costs because “the subcontract was not the sameas the prime contract; it merely incorporated provisions of the prime contract for the purposes of effectuating the subcontract.” United further arguesthat the parties did not follow the timing provisions of the contract, and that industry standardsdid not require strict compliance with these timelines but allowed for United to wait as long as a month after work was completed to submit change orders. Weneednot reach the merits of United’s claims because United hasfailed to showthat thetrial court erred in its determination that United failed to prove damages. Onappeal, United challengesthe trial court’s ruling on damages in only one respect: It contends that the court’s misinterpretation of the parties’ responsibilities in submitting change orders “tainted its application of the modified total cost theory.” Nothingin the record supports such a conclusion. The court found that United failed to meet the requirements of the modified total cost theory on several bases independentof the change order requirements of the contract. Underthis method, damagesare the amountofthe total cost of performance reduced by the amount required to be paid under the contract. (Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228, 243.) To prevail on this damagetheory, a plaintiff must demonstrate the following: “(1) the impracticality of proving actual losses directly; (2) the plaintiff’s bid was reasonable; (3) its actual costs were reasonable; and 10 (4) it was not responsible for the added costs.” (/bid.) “If some of the [sub]contractor’s costs were unreasonable or caused by its ownerrors or omissions, then those costs are subtracted from the damagesto arrive at a modified total cost.” (Dillingham-Ray Wilson v. City ofLos Angeles (2010) 182 Cal.App.4th 1396, 1408.) The court found that United failed to meet the requirements of the modified total cost theory on several bases independent of the change order requirements of the contract: (1) United failed to demonstrate how the absence of Coast’s representative on the work site caused damages; (2) The lack of necessary parts did not add to United’s costs because United was always able to shift to other available work while waiting for parts to arrive; and (3) United’s expert failed to demonstrate that Coast was responsible for delays. These findings preclude recovery underany theory of damages. DISPOSITION The judgmentof the court is reversed with respect to retention payments and attorney’s fees. The case is remandedtothe trial court for further proceedingsto determine penalties and attorney’s fees to which Unitedis entitled, including fees forthis appeal. The judgmentis otherwise affirmed. NOT TO BE PUBLISHED. ROTHSCHILD,P.J. Weconcur: JOHNSON,J. LULJ. 1] — _ C o O o O o N N O O B R W H D N PROOF OF SERVICE At the time of service | was over 18 years of age and not a party to this action. My business address is 444 West Ocean Boulevard, Suite 1614, Long Beach, California 90802-4524. On December29, 2015, | served the following documents described as PETITION FOR REVIEW. | served the documentsonall interested parties, as follows: Dirk Bruinsma Attorney for United Rigger & Erectors, LAW OFFICE OF DIRK BRUINSMA Inc. 1181 Puerta Del Sol, Suite 120 San Clemente, California 92673 Email: dirk@bruinsmalaw.com Tel: 949/443-9030 Fax: 949/433-9035 Clerk, Court of Appeal Clerk, Los Angeles Superior Court Second Appellate District, Div. One 12720 Norwalk Blvd. 300 S. Spring Street Norwalk, CA 90650-3188 Fl. 2, N. Tower Los Angeles, CA 90013-1213 | am employed in the office of a memberof the bar of this Court at whose direction the service was made. The documents were servedbythe following means(specify): a. ik] By United States Mail. | enclosed the documents in a sealed envelope or package addressedto the personsat the addresseslisted above. | placed the envelopefor collection and mailing, following our ordinary business practice. | am readily familiar with this business’s practice for collecting and processing correspondencefor mailing. On the same day that correspondenceis placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postagefully prepaid. | am employed in the county were the mailing occurred. The envelope or package wasplacedin the mail at Long Beach, California. By Overnight Delivery. | enclosed the documents in an envelope or package provided by an overnight delivery carrier and addressed to the persons at he addresseslisted above. | placed the envelope or packagefor collection and overnight delivery at an office or a regularly utilized drop box of the overnight delivery carrier. | declare under penalty of perjury under the laws of the State of California that the -foregoing is true and correct. Date: December29, 2015 C\ lqVQ wyVELOFFYO) -1-